Conflict between Leung Chun-ying and John Tsang Chun-wah can spur debate on city's future

What happens to a government when its leader and its financial chief seem to be at odds; not about anything personal, but due to conflicting views on government spending?

Does it represent a power struggle similar to that seen between former British prime minister Tony Blair and his chancellor of the exchequer Gordon Brown years ago? Or does it simply reflect a division of views, not only between the two, but among the public. It could be either or both, but what matters is whether it is negative or something that can be constructive.

It is an open secret in Hong Kong that Chief Executive Leung Chun-ying and Financial Secretary John Tsang Chun-wah do not always see eye to eye, especially on how to manage the city's more than HK$700 billion financial reserve, although both claim they have good working relations.

Their conflicting views seemed even more obvious after Leung released his second policy address, in which he rolled out a massive poverty-relief package that will see recurrent government spending soaring by HK$10 billion a year.

Over the past two weeks, Leung and his top aides have been busy taking every opportunity to convince the public the increased spending is affordable in the long term, on the basis that the money will be used in the right way to tackle urgent social woes such as poverty and therefore boost Hong Kong's long-term economic growth.

But one person seemed to be missing from these occasions - Tsang. Just days after Leung's speech, he used his blog to renew his warnings on the risk of the budgetary surplus turning to deficit, adding that public concern was not "without reason".

To many, this was seen as proof of the long speculated split between the two. Political gossip even suggested that it was Beijing that eventually convinced, or asked, Tsang to accept Leung's "open-the-safe" speech this year, and some rumours described Tsang as Beijing's "gatekeeper" for Hong Kong's financial safety. But this time Beijing supported Leung's "big spending".

Leung soon made it clear that Tsang was on the same page as him, stressing that he got input from his senior colleagues, including Tsang, during the drafting of his policy address.

But putting aside conspiracy theories, what Leung and Tsang both said could be seen as two sides of the same coin.

As chief executive, Leung needs to set Hong Kong's future development goals and direction by tackling the most pressing issues that are hindering the city's growth and competitiveness. He believes this can be achieved by spending a significant amount of taxpayers' money rather than sitting on it.

But being the financial secretary, or as he is called in Chinese "The God of Fortune", Tsang has the responsibility to balance the books. Making timely warnings to all, including his boss - even if it is seen as "crying wolf" - is sometimes part of his job. Another practical reason could be that Tsang wants to lower public expectations, especially from the middle class, of more "goodies" in his budget next month.

Tsang is expected to forecast, for the first time, an estimated timetable for the budget to turn from surplus to deficit; giving the public a clearer overall picture of the government's finances. However, that may make Leung more convinced that rather than being cautious, the government must dare to spend to generate new revenue through a healthier economy.

It could be said that Leung and Tsang share the same concerns - tomorrow's needs - but have different approaches. What does matter is whether spending our surplus lavishly produces a stronger economy and resolves today's social woes or pushes us into a vicious circle of deficits. It is an important investment decision for all which needs confidence, not only from the government but also from the public, and this needs to be built through more rational debates.

In this regard, what seems to be a "Leung-Tsang rift" could be a good excuse for more public debate on how we should spend our money wisely and if not now, when?

This article appeared in the South China Morning Post print edition as Top two's differences on city's spending should stir up debate

My guess is that the property development industry remains a political force with power to have government on its side. Certainly we can surmise from little performance of Donald Tsang in his watch yet that property developers prospered most in the shortest period of time. It is no exaggeration the property developers influence heavily in our government in drying up the affordable housing for the locals.
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The open conflict between CY Leung and John Tsang is very much a conflict between CY Leung and the property developers. As long as there is no economic reform in Hong Kong business with laws firmly against monopoly, we will see someone in the government including John Tsang fighting a proxy war for the property developers with a government who wants to reform. The selling of the hotel as an investment was the first battle and the open conflict of the two officials is the second battle.
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The central government is playing along pragmatically and carefully. I believe the public's input has the officials' ear must. The dying moth must bite open the cocoon to get its life to become a butterfly.

keresearch Jan 28th 20146:58pm

for the first time a forecast of surplus turning into deficit ? the five year medium term forecast which does exactly this can be found in every Budget Appendix.

johnyuan Jan 27th 201410:58am

Hong Kong’s future is cocooned with an almost dead moth inside by its property industry. Since the late 60s, Hong Kong’s sever short of proper housing had made people embraced owning a flat what living in Hong Kong is all about. Property development industry prospered ever since till CY Leung’s high tax on luxury flats. Hong Kong is facing a shortage of affordable housing even for the middle class of which normal supply from the property developers who turned to selling luxury flats instead all geared to rich mainland buyers. This all provided the backdrop of the conflict between Leung and Tsang in the open.
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Tsang, the second time being the Financial Secretary is mostly by design of his reappointment. It is not so strange since too I believe Donald Tsang, one time a FS himself in the colonial time never left the government till his retirement. John Tsang is repeating such practice even though that the public isn’t informed of its rationale. The public may never learn.